Fed Vows Near-Zero Rates Into 2013

NEW YORK (TheStreet) -- The members of the Federal Reserve's open market committee voted Tuesday to keep the key interest rate at near-zero levels at least through mid-2013 as long as economic conditions remain subdued.

"The committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the committee judges to be consistent with its dual mandate," the policymakers said in a statement following the regularly scheduled one-day meeting.

"Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity," they added.

The Fed now expects inflation to settle at levels at or below those consistent with their dual jobs and inflation mandate in the coming quarters as high energy and commodity price levels dissipate. The statement gave no indication that the central bank plans to implement a third round of quantitative easing, commonly referred to as QE3.

There were three dissenting votes at the meeting coming from Richard Fisher, Narayana Kocherlakota and Charles Plosser.

Stocks were volatile in the wake of the news with the Dow Jones Industrial Average, up more than 200 points earlier in the session, turning negative, and the S&P 500 and the Nasdaq both trimming their gains.